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Lending Club PRIME Review

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One of the big stories in the last few years has been the rise of peer to peer lending sites. I haven’t written as much about them on Bargaineering because I’m not allowed to invest! Only residents of certain states are allowed to invest at Lending Club and, unfortunately, Maryland is not on the list. :(

That said, I still like to keep up to date on what’s happening and it turns out that Lending Club has a “mutual fund” type of managed investing option called Prime. (they also have some private funds for accredited investors, I’m speaking with someone about that too… look for a review of that in the future) While many people are familiar with the process of using Lending Club, and what the site offers, many are unfamiliar with the fact that there is a “prime” option.

Lending Club PRIME provides investors with a minimum investment amount the opportunity to take advantage of a different service — one in which Lending Club takes care of your note investing for you.

How Does Lending Club PRIME Work?

First of all, you need to have at least $25,000 to have a PRIME account. You can open your account as a regular taxable account, or as an IRA. If you have $25,000, you can go through the process in Lending Club of designating it as a PRIME account. Then, you decide what type of loans you want to invest in. Basically it boils down to deciding whether or not you want your notes to encompass low, medium, or high risk.

Once you have determined the desired risk level of your portfolio, Lending Club takes care of the investing. Your money is invested in different loans based on your desired level of risk. The loans are diverse, so your portfolio will be built using a wide variety of loans (A through G) that affect the overall risk in your portfolio.

As principal and interest payments are made on your notes, Lending Club automatically reinvests the money. Unlike the standard Lending Club account that requires that you log in and find new notes to invest in, PRIME keeps everything running smoothly, so you don’t have to do anything — except pay the 0.8% set up fee.

It is worth noting that the cost of PRIME is based on your initial investment. So, if you initially invest $30,000 in your PRIME portfolio, you will be charged a fee of 0.8% of the initial balance. However, once that is done, you aren’t charged for reinvestment. This is more of a set and forget it type arrangement. You designate your PRIME portfolio, pay your fee, and the Lending Club automatically does the rest. You can set up different PRIME portfolios, each with a different purpose, following the process each time.

Who Does PRIME Work For?

Because of the high minimum to designate an account as PRIME, this service is best for those who have a larger amount of investable assets. It’s also a good option for those who want to take advantage of investing in P2P lending, but who also don’t want to have to heavily manage their investments. It can be a great option for those who want to open an IRA (you can roll it over from another trustee) and use the money to build a nest egg over time. Ultimately, it’s meant for people who want to invest in peer to peer lending but don’t want to sift through loans themselves. Who else better to do that than the people who run the program?

Realize, though, that you are likely to see “average” returns with a PRIME account because of how it’ll be diversified and you are paying for the service. They do a lot of the heavy lifting but the cost is real, you are paying someone else to sift through loans. :) However, if you are more of a hands-off investor who just wants automatic re-investments, PRIME could work well for you.

What do you think? Have you tried Lending Club PRIME?

{ 11 comments, please add your thoughts now! }

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11 Responses to “Lending Club PRIME Review”

  1. Peter Renton says:

    I have had a PRIME account for two and a half years and I have been reasonably happy with it. The main point I would emphasize is that it is really for the hands-off investor. I have other Lending Club accounts and my PRIME account is the worst performing account (at around a 7% return). Active investors can do better than PRIME but it does take some time and effort.

  2. DMoney says:

    I like the hands-off approach of this. I don’t really want to get into details, and I like safer bets, so this is pretty interesting.

  3. I jumped in to lending club a few months back and I am happy with my decision. I was not aware of this prime account but I also dont have that much to invest at this time. Perhaps if I continue to build my portfolio and get to that amount I will reassess and move it all to prime and let them do the work for me. Thanks for the info!

  4. Jim M says:

    Good Post – I am interested in investing in peer-to-peer lending and like that borrowers get a fair deal. The 25 thousand entrance fee is a little steep. Please keep us up to date on other options in this emerging investing/borrowing industry.

  5. Ray says:

    Prosper also has their own version of this called Prosper Premier if your using them instead. Again $25000 is required.

    I prefer the idea of picking and choosing myself, however. Especially if there is a fee involved for this service.

  6. Seth says:

    I don’t have the prime account, but I tested out the regular investing for a while. It doesn’t take many defaults to completely destroy your earnings. I tried to pick through the loans, but have ended up with a pitiful portfolio. At this point, I’m crossing my fingers that I will end up with all of my principal returned by the time the terms of the notes complete.

    • Dan B says:

      It is difficult for readers to assess your comments without additional info. such as how many loans you invested in, for how long have you been investing, your default percentage etc etc.

      Because contrary to what you stated, if you are properly diversified (at least 400 notes, preferably more) it DOES in fact take “many defaults to completely destroy your earnings”.

  7. Jerry says:

    I established 2 accounts with Lending Club. The first, a Prime Account which is up and running.

    The second account I decided to purchase the course and manage myself. Well, 6 weeks have gone by and I still don’t have it up and running. The initial time to get it all figured out, which is not entirely easy, while life seems to be still happening, seems considerable. Lost time is worth considering.

  8. Vijay says:

    For the month of November 2012, Lending Club is waving the 0.8% transfer fee and setting the minimum at $10,000. This is to celebrate their passing $1 billion in funded loans. I have opened one, but I am in Texas, and not sure if Lending Club will allow me to directly invest in loans. Their is a new option now where you can specify the %’s to invest in each loan grade or specify a range of acceptable loan grades and what your target loan grade is.

  9. Brooklyn Money says:

    Hi Vijay,

    That is an awesome tip, thanks! I reached out to them about the offer. Hoping I can get in on this.


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